BrightSpring Health Services, Inc. (BTSG) September 10, 2026 Conference Transcript

All right. Thank you, everyone. We're really pleased to close out the conference. The last fireside chat will be with BrightSpring. So BrightSpring is a provider of a variety of pharmacy and provider services from the company. We're happy to have CFO Jennifer Phipps here with us and David Doikler from Investor Relations. Thanks for being here. Really appreciate you making the time. Any kind of introductory commentary you'd like to make, or should we just kind of get right into a good question?

No, we can go ahead and jump right into the questions.

Okay, great. Well, maybe just to step back a little bit, you know, in the pharmacy business, you know, EBITDA growth in this business, if we go back to call it 2022, 2023, 2024, really range kind of in that 6% to 8% range. You know, since that time, you've really seen a remarkable acceleration with EBITDA growing, you know, almost 40% in 2025, and you're over 40% in the first half of 2026. So from a big-picture perspective, I guess, how should we break down the acceleration between kind of the different key components of the business?

Yeah, so, you know, from an acceleration standpoint, I would say, you know, we have a number of growth drivers across our pharmacy segment. First specialty pharmacy, the growth drivers have been LDD wins. These are not necessarily in any particular order, but LDD wins that we've had in each of the years. Ramping of prior LDDs that we win in prior years, because those typically take two, three, four years to ramp fully in the marketplace. We've seen growth drivers in terms of generic conversions. And then our fee-for-service business associated with supporting the LDD manufacturers have driven growth in our specialty pharmacy business. From an infusion standpoint, we've continued to see volume growth across acute and targeted chronic infusion underpinned by our high-quality services. And then from a home and community standpoint, the growth drivers have been multifaceted there as well. We continue to obviously seek profitable volume growth. We did have some script changes, as we talked about last year, as we exited some uneconomic customers from a profitability standpoint. And then growth in good core volume there, but also a significant amount of operational efficiencies that we've been working on, whether they're driven by AI projects and automation that we've done, as well as other operational efficiencies.

That's great. Then maybe to zoom in a little bit more so, come back to the second quarter, I think one thing if we were to look at the pharmacy solutions results, I think gross profit per prescription was a bit lower in the second quarter than it was in the first quarter. I think that was a bit of a point of confusion for the market given some expectations for a step up for certain recent generic launches. As you think about going from Q1 to Q2 and the various factors that impacted those comparisons, just help us think about that. And when the company discusses that it sees Q2 underlying gross profit is higher than Q1, like what are the considerations to keep in mind there?

Yeah, so in Q1, we typically have some, and we have this every year, some seasonality for price appreciation that occurs related to inventory that we have on hand. And that is a dynamic that benefits the first quarter. When you exclude that benefit, we actually did see growth in a gross profit per script. And I think there's a number of drivers. Obviously, gross profit per script is really an output for us of probably 70 to 80 different factors across each of our different business lines. And, you know, how are different business lines? So each one of our products and each one of our different business lines has a different GP per script profile. And so we're really focused on growing underlying EBITDA, GP dollars and EBITDA growth for the sustainable long term. So that's really what we're focused on. And, you know, we really look at GP per script as an output. We're certainly not going to stop growing, for example, or stop working to grow our home and community pharmacy business, because that is our lowest per script, just because that could negatively impact a gross profit per script measure. So again, we're really focused on, you know, the total and long term sustainable growth rate across both of those.

Okay. And then, you know, as you discussed a little bit with one of your previous answers about the acceleration, I mean, the track record of winning new LDDs has obviously been, you know, phenomenal. When we think about the key considerations, you know, that manufacturers have when they're selecting specialty pharmacies, I guess, how different are they now than they are in the past? And many of your recent launches have been concentrated in, you know, exclusive and ultra-narrow arrangements. Like, do you start to think of this increasingly as being the new normal in many cases?

We continue to see this being the path that oncology and rare and orphan drugs are going into these exclusive and ultra-narrow categories as manufacturers and pharma have gotten increasingly comfortable that a small number of pharmacies can fully service their drug. We're focused on having really high-quality services. We have, you know, one of the best time-to-first fills, you know, compared to many of our competitors. We are focused on having high patient satisfaction scores, medication possession ratio, which is an adherence measure. We think that produces ultimately, you know, better outcomes, which is valued by our pharma partners, you know, and we seek to just be, you know, a full-service partner for any of the needs that pharma would have in servicing their drugs, and we take pride in executing on those.

Okay, that's great. And then, you know, obviously you provided, you know, some attractive financial targets for the business quite recently. And as we think about the role that, you know, LDDs play in that, I guess, how much of that growth can be delivered on, I guess, from LDDs that you've already won and have a pretty, you know, healthy ramp up period in front of them? I guess how dependent are the targets on winning LDDs that you don't yet have today?

Yeah, so again, typically it takes two to three years for a drug to fully ramp in the marketplace. We actually have seen growth this year from even a small amount, but from drugs that were launched in 2021. So you do continue to see some growth. I would say, you know, we have good line of sight also to what that portfolio is going to look like, what those wins are going to look like, typically 12 to 18 months out. And so, you know, all of those things go into, you know, our considerations and certainly went into, you know, our view of the range, you know, that we put out at the investor day. Okay.

And you've recently highlighted your expanded focus on LDDs, the infusion market, and you've highlighted some recent wins there. Maybe give us an update on this part of the strategy and how to think about the size and the importance of this opportunity.

Yeah, we're really excited about, you know, the opportunity within an infusion. We're focused on growing density and some additional markets and from an acute standpoint. And then we think that gives us obviously, you know, leverage in negotiation and scale that is helpful from a procurement standpoint. And then on the chronic specialty side, which is where you typically see the LDDs in the infusion space, we're excited to really partner and we've been spending a lot of time working on and thinking about our strategy and specific targeted disease states and drugs that we believe are attractive and are working on building sales strategies associated with that. So we see this as, you know, a continued good opportunity for us to continue to grow in this market.

Okay, great. And then we're going to think a little bit more about, you know, the generic conversion part of the story. You know, maybe walk us a little bit through the playbook here for a branded to generic conversion. I guess how does that typically work? And then, you know, talk a little bit more about how to think about the durability of it. But just walk us through, I guess you have an initial conversion coming up. How does that work for your company?

Yeah, so from a conversion standpoint, we typically are, you know, in advance of a conversion, we're focused on getting volume in that particular drug. So our focus when drugs are branded typically are the LDDs that we're servicing, and the drugs that have been going generic are a lot more of the highly commoditized brands that we've typically seen. So we're focused on gaining volume in advance of that conversion, and then we have an operational team that focuses on the ability to execute very, very quickly and converting that. So generics are really good for patients. It's good for the system. It reduces the cost of the drug to the market, and so we want to be a really good partner and be able to do that conversion as quickly as possible. So we typically are able to get almost 100% conversion very, very quickly early in the launch, and the team has been very successful at doing that. It takes a lot of prep work to be able to do that. And then from there, it's continuing to grow the volume because of our large sales force that we have from a generic standpoint. Okay.

And I guess as you think about it, you know, once you're generic, you know, you move kind of outside the LDD or the exclusivity that you've had before, I guess, how does the company work to operationally keep the volume to you versus potentially having, you know, it leak out to other, you know, places in the system?

This is where I think it's really important, the patient satisfaction, the high-quality scores that we have in terms of medication possession ratio. Nothing changes once a drug goes generic. So we still have the same requirements, whether there are REMS programs, toxicity programs, other things that we need to manage and help patients manage while they're on the drug. And so our ability to navigate that, I think, has been important. The sales force that we have that's out trying to pull through scripts has been very important. And then just making sure that patients, when they're on the drug with our Onco360 or CareMed brand, ultimately are going to be able to continue and want to continue to receive their services from our pharmacy. Okay.

And then, you know, I think, you know, one question that comes up a lot is just kind of the durability of the improved profitability that a generic conversion creates. And when you think about, you know, the examples that I think people are familiar with in the retail pharmacy business, you know, ultimately there is eventually a catch up on the reimbursement side. I guess, you know, you're dealing with a pretty unique set of drugs. How does it work for your business?

Yeah, so, you know, historically what we've seen is, you know, generic price step down over time, which, you know, typically happens, you know, over, you know, a five to 10 year period. And we are working to grow volumes and then also get better pricing from manufacturers at the same time to help offset some of that impact. But separately from that headwind, you have new LDDs that are launching, you have LDDs that continue to grow, we have fee-for-service that continues to grow, and new generics that are launching in the market. So all of those dynamics are helpful for tailwinds that help us with the headwind associated with generics over time.

Makes sense. You guys have, you know, some great investor materials that I think help people focus on some of the key generic launches and kind of the year that they sit in. You know, I think some of the key drugs that have been highlighted for 2026, or I'm going to pronounce these horribly, Busalif, Pomalyst, and the Grydap. Just remind us how much of the initial benefits for those drugs have been realized at this point, and I guess how you're thinking about the phasing of, you know, the generic impacts throughout the year.

Yeah, so, you know, obviously we don't talk very specifically about any drug. Most of those apomalists, you know, launched, that was the biggest of that group, launched early in Q1. And so, you know, you saw a lot of that in the run rate within Q1. And we're, you know, as I mentioned earlier, we're really focused on, you know, getting our patients converted to generics as quickly as we can and having them ready to go, you know, as soon as that conversion takes place. So I would say that largely is run-rated, and then, you know, you just continue to see incremental volume as it relates to new patients that are coming on that drug that we're working to win.

One of the things that is kind of important to recognize is that most of the drugs that are going generic last year, this year, over the next couple of years, were branded drugs that came to market 10 or 15 or 20 years ago. And those pharmacy networks are typically 10 to 15 to 20 pharmacies. And once the brand drug goes generic, it actually represents a new market opportunity for us. We're building a cohort of patients when the drug is on brand. But once it becomes generic, we have several hundred person in Salesforce that's out in the market trying to drive volumes. And as that volume growth increases, our franchise, if you will, for that drug has a great opportunity to grow, Even as there's deflationary pricing into the market. So we have a very kind of long-term perspective as we think about the generic franchise. It's multifaceted across many different individual drugs. But that patient volume story is an important dynamic to think about our franchise as you think about kind of longer-term growth. It's not a drug goes generic, maximize profitability, and the story is, quote, unquote, over. It's really just the beginning of the growth of the franchise.

No, that makes sense. And as we think about, you know, I guess some of the future cohorts, I mean, at face value, it looks like, you know, the 2027 cohort, 2028 cohort, like represent, you know, a lot of brand revenue. I guess it's always a little harder to tell for each individual drug, like how many, you know, to your point, like the size of the networks and things like that that are important considerations. I guess, how does the company generally thinking about those two years in terms of, you know, the opportunity there, maybe comparatively to, like, the 2026 or 2025 cohorts that we've seen impact the P&L at this point?

You know, we do expect the 27, you know, our best view is the 27 generic conversions are going to happen later in the year. So from a timing standpoint, you know, that's our best view, you know, as it stands today. You know, so as you think about the 27 impact from those launches, I think there will be more impact that will be in 28 from the 27 launches, just given the timing, you know, of those launches. But, you know, certainly those are meaningful drugs and the generic conversion opportunity is, you know, the generic conversion is very important, you know, ultimately to the entire ecosystem from the healthcare system.

Okay, that's great. And then, you know, I think you touched on this a little bit, but if you focus on, I guess, the home and community business, you know, the top line, I think, has been impacted by a couple different factors. And, you know, 2026, obviously, IRA drug price negotiations are having a big impact. Like, how should investors be thinking about, you know, impacts prospectively from here on the top line and bottom line from IRA?

Great question. So, you know, as we have talked a little bit about historically the impact associated with 27. So IRA addressed the largest drugs first. So 26 is our biggest impact year. So as you look at the cohort of drugs, it's just a smaller cohort of drugs from a 27 perspective. We expect the revenue and EBITDA impact to be approximately half of the impact that we saw in 26. That's without further mitigation. We continue to also seek additional mitigations as we're negotiating our contracts with payers. Importantly, late in 25, right before the 26 launch, CMS directed the payers to ultimately cover the impact to the long-term care pharmacies. Obviously, many of them, you know, did negotiate to do that. We continue to negotiate, you know, enhanced dispensing fees, further enhanced dispensing fees that we believe, you know, will hopefully mitigate even further.

Are those, like, offsets that you've gotten for 2026 at all, or at this point you're still negotiating for both 2026 and 2027 impacted drugs?

So we did get offsets in 26, and that took our number to an EBITDA impact of 15. So that's the mitigated number to the extent that we're able to get additional enhanced dispensing fees that would apply to everything that would be IRA. So that would include the 26 cohort of drugs as well. Okay.

And then, you know, we focused a lot on, you know, the growth, but if we're focusing a little bit more on, you know, the operating expenses, it seems like, you know, some of the really strong gross profit growth that you've generated is, you know, giving you an opportunity maybe to invest a little bit. You've seen a big tick up in the operating expenses this year. Maybe talk a little bit about, you know, where these investments are going and maybe how should we think about the pace of expense growth in the business going forward?

Yeah. So, you know, some of our investments have been permanent investments. For example, investments in Salesforce and incremental sales force that we believe will drive volume into the future. And then some of those investments have been more temporary or one time in nature, things like building out IT, best in class systems, or some of the AI initiatives that we've talked about. So we will continue to look, and over the last several years, you know, actually, frankly, back to, you know, John joining the company and me joining the company, we've continued to invest for growth, you know, over the last 10 years. So, you know, our EBITDA could be higher if we weren't, you know, thinking about, you know, how to, or in prior years could have been higher, but those things, those investments that we've made, you know, help drive future growth. So we're managing and thinking about EBITDA growth over the long term and how do we maximize that with the right initiatives. We obviously want to make sure any of those things that we're investing in have the right ROI and that will ultimately receive a return on that. But certainly our performance has allowed us to lean in to a lot of those investments that we're excited about.

Got it. No, that's helpful. And then if we were to, you know, maybe pivot to, you know, provider business for a little bit before kind of coming back to enterprise and capital deployment, I mean, it's been a really good year for EBITDA growth, you know, both organically and all in for the provider business as well. It looks like, I think, organic EBITDA is growing around, you know, nearly 20% in the most recent quarter. So it looks like, you know, you're growing nicely and also, you know, getting a good deal of margin expansion to drive that. Maybe just update us on, you know, what some of the drivers are of that improved operating leverage. You know, are you benefiting at all from, you know, maybe pace of slower wage inflation than we've seen over the past couple of years? Just help us understand what's happening in that part of the business.

Yeah, we're really proud of the growth that we've achieved in our provider side of our business. Really, we've seen, you know, multifaceted growth across each one of those businesses that we have there and underpinned largely by volume growth, which is, you know, supported by the high quality care that we're able to provide. We continue to, you know, execute really well on the Emeticis LHC acquisition that we did early in December and, you know, are excited about what that has done in terms of opening additional market opportunities for growth, you know, across many different geographies from a home health perspective. We have been able to continue to leverage our infrastructure for some of that growth. I would say we've continued to invest in wages and invest in benefits and invest in our people. And ultimately, we've been able to help offset some of that by reduced turnover, increased stability in our workforce has been certainly beneficial and helped offset some of that.

No, that's great. And then you touched on this, but, you know, you have the pretty material amount of newly acquired assets in the portfolio. I mean, specifically the deal you referenced, but, you know, you've been acquisitive in the provider space, you know, generally over the past few years. I guess how should we think about, you know, generally how the integration has gone, like how are a lot of these assets tracking first plan? And I guess how much, I guess, room is there to still improve profitability for some of the businesses you've acquired more recently?

Yeah, no, really good question. You know, when we do M&A, we're focused on certainly, you know, a number of different factors. One of those is we're highly focused on our long-term total company growth rate. And so, you know, the acquisitions that we're looking to do, we're focused on the ability to continue to grow in the markets that those businesses are in. And, you know, as we think about, you know, our ability to integrate, we have a really great corporate development team and an integration management office that has been able to deliver really good working with all of the different functional groups and whatever operational business team that the particular acquisition is in, which has driven, you know, ultimately, I think, I forget exactly what number of acquisitions we're up to now. It's over 80.

It might be 85, actually.

And all but two, the EBITDA is ahead of what we acquired them at. Our pro forma multiple over the course of those deals is under four times. And so we've been able to drive a lot of operational synergies and growth synergies, revenue synergies across those deals. Okay.

And you mentioned AI earlier, but as you think about what are the highest priority opportunities within the business, like clearest applications of AI, what would a couple of interesting use cases be to highlight? And in general, I guess what's the company's financial framework around evaluating investing in AI and the kind of returns you're looking for?

Yeah, so we really started thinking about AI technologies probably about 24 months ago. About 12 months ago, we really in earnest started building out a team. You know, as we really were looking at different use cases, given our scale, given, you know, where some of those technologies were and what we were going to have to do to participate in the building out of that anyway to use that if we were using other partners, you know, we really felt like we could do that better ourselves. And so we've built a team. I think we're now up to almost 30 people on that team that is actively working on some very specific use cases. So, you know, one example that we've talked about is, you know, how can we, you know, so we're focused on certainly areas where it's highly manual, high touch, back end or front end processes. You know, one example, you know, that we're working on is in our infusion business when we get a new referral, and those are referrals that need to be managed very, very quickly, a lot of times from an acute standpoint, you know, where a patient might need meds delivered in their home within three hours. We might get over a medical file that is 300 pages long, and it, you know, historically might have taken an individual, you know, 45 minutes to just make sure they input the relevant factors from the patient's medical file into our EMR to make sure we've got the proper documentation to be able to get through benefits verification. We're working on AI tools that are helping our team do that much, much faster. So that's just a practical example, you know, where we're utilizing. We've got a lot of rev cycle examples. That's a good area. Central intake and pharmacy. How do we do things, you know, much more in an automated way? Today, we're working on tools, you know, across our provider business that, you know, might not lead to efficiency, but ultimately, you know, higher quality results. How do we make sure, you know, we're, you know, getting better visibility and, you know, into, you know, care plans that might, you know, help manage their disease state even better than we do today?

Yeah. Okay, that's great. Great. And then just when we think about the balance sheet, I guess you're in the enviable position of, you know, looks like you'll be approaching two times leverage pretty quickly. You know, targeted level, I believe, is mid twos. Obviously, you still have a pretty attractive, you know, EBITDA growth target in front of the company for the next couple of years. So overall, that's an exciting position to be in. I guess, how do you think about, you know, the balance sheet capacity that you're going to have and kind of how to best utilize that? And, you know, otherwise, you know, what kind of would keep the leverage towards just trending down to well below target? I guess, what do you do with that?

Yeah, really good question. One of the things that we're most proud of, I know John would say the same thing, you know, I know David would echo, is what we've done from a leverage perspective, you know, post-IPO, and then the value that that ultimately is able to help us unlock. I think we believe that our highest use of capital is M&A and our ability to do highly accretive M&A, and so that remains a priority for us. Having said all of that, we still are very focused on making sure we're doing the right deals at the right price, that have the right strategic fit, and so how that ultimately plays out and what deals do we get across the finish line. We have a very robust pipeline that we're constantly working. And the team is extremely active, as I'm sure you can imagine, with the balance sheet position you mentioned we're in, really thinking about what those deals are going to look like. So I would say that remains our highest priority. We have stated, you know, that we would like our share count to remain flat at a minimum. So I would say, you know, over the next couple of years, like, we'll be thinking about that, you know, as a goal. And then ultimately, you know, as the deals play out and as we generate really strong cash flow, there may be additional opportunities for return of capital potentially to shareholders and additional buybacks. But I think we're probably, you know, nine to 12 months out from really, like, thinking about, you know, what that could look like, you know, at this point.

Yeah, the history of the company over the last five years has changed quite a bit, right? If you think about where we were five years ago as a private company, the business mix was quite different then. And as we look forward over the next five years, it may require a different capital structure and a different way to think about capital allocation. But we're very much in a transition period, having been just north of four times levered IPO two and a half years ago. As you mentioned, kind of run rating under two times. Let's give it a couple of quarters or maybe a year before we kind of think about how the right capital structure should be and how we think about the priorities for allocation outside of M&A.

And historically, the company's M&A has been pretty focused in the provider side of the business. Like, when you look at what the opportunity set is there, I mean, maybe what's the latest thinking on, you know, what's attractive, I guess how competitive deals are, and like, you know, valuation obviously has been something that the company's been disciplined on over time, or the valuations in a place that make things actionable. Yeah.

I would say our balance sheet position, we have historically done a lot of very small tuck-in M&A, call it 5 million or less of EBITDA. I continue to see that as being table stakes for us and continuing to do a number of those deals. Those are very, very attractive multiples that we're able to generate because of the synergies, and so we'll continue to remain focused there. You know, as we think about, you know, what the balance sheet position does allow us to do, I think, you know, as you think about deals in the $10 to $15 million of EBITDA range, you know, do we lean into a couple more of those deals a year, potentially? I think the answer is yes. That's, you know, obviously, it's got to be the right deal. It's got to be the right price. You know, we're very focused on, you know, our continued long-term growth rate. And so, you know, certainly we'll see. But, you know, and would there be a deal in the $15 to $50 million range that we do once every couple of years? You know, I think certainly we have a balance sheet position that would allow us to do that.

Yeah, just maybe, you know, it seems like the balance sheet is kind of no longer the issue. I guess when you think about, like, operationally and kind of integration work that has to be required, I guess, how's the company, you know, prepared itself maybe to do things like that?

Yeah, I think we're in a really good place. We've got a really great team from a corporate standpoint. We have an entire integration management office. I think we have a playbook that we've executed on really well to do that. I think it allows us to do that across whatever, and we're in a lot of different businesses that allow us to then look across all of those businesses and see what's the most attractive opportunity. So we have, you know, we have things that we would potentially like in each one of our businesses. I would say, you know, as we think about pharmacy space, I would say infusion and additional markets. There's some additional markets that we really, you know, would like to be in. And can we get there faster because of M&A, you know, from a pharmacy perspective? I think that's something that's of interest to us. We feel like we've got the right team in place that can deliver on the growth that we want to have. So we're looking, I think, in that space. Certainly valuation is a consideration there. Home and community pharmacy, we've done small tuck-in M&A there. I don't see that change. I think that's probably the base case. That's probably what we would do or be interested in in that space. And then, you know, as we think about home, you know, home health, hospice, primary care, and rehab, there's different geographies that are very attractive to us as we think about, you know, providing more density and more geographies and having more of our services align across our different business. So, you know, we have, and our M&A team, our corporate development team is focused on really looking at all the different opportunities across those different sets. But our operators are very closely tied in to the M&A strategy associated with each business. And then we can look across all the different opportunity sets and ask what's the most attractive. Interesting.

Okay. And then, you know, I know a big part of the story, especially as the company, you know, came to the public markets, was just that the integration between, you know, many of the businesses was, you know, very value creative, and there are a lot of opportunities to kind of cross-sell and generate value in that way. I guess just give us an update on generally kind of what the key milestones have been, you know, in terms of themes like that. And the company's got some interesting business initiatives that it's been working on with more like ISNIP-type plans. Like, where do those stand today?

Yeah, so, you know, we continue to obviously have certain of our businesses provide services to other parts of our business. So, for example, all of our hospice patients receive their medications or, you know, their PBM services from our hospice pharmacy. So there's examples, tangible examples like that that have existed in our organization for a while. We have been really focused over the last couple of years building out integrated care teams that are focused on driving opportunities across business lines. So that could mean and does mean in some cases, like, for example, we have a team that's focused on senior living opportunities. So if you look at senior living communities, they all need a pharmacy. They all need home health. They all need a Part B rehab provider. They all need primary care doctors, and they all need rehab, or I think I said rehab maybe already. But so those are all in hospice, in some cases, partnership. Those are all services that we offer. So how can we, and we put resources now and a team that's focused on doing some go-to-market strategies across those, and how do we figure out, how do we leverage the relationships that we have to deliver more of our services to our partners? There's a number of other initiatives. So you talked a little bit about we have ACO opportunities and ISNIP. That's definitely a much smaller piece of our business. But as we're stepping into more care across in density in different markets, how can we better leverage the outcomes that we're producing for differentiated payment models? That's interesting to us.

That's great. That might be all the time we have today. Thank you very much for being here. Yeah, thank you. Very comprehensive update. Thank you.

Thanks for having us.